Digitalization requires a new Direction

last month I mentioned about the DTH operators feeling insecure and now it is being talked about in the open by many. Even TAM has come out with the findings that analog cable subscribers prefer shifting to Digital cable rather than DTH inspite of it being touted as a better service. In my point of view, it will remain a service for the rich and elite and people staying in cable dry areas and operators should focus on that leaving cable service for masses..

Considering, these findings given in the table below, I feel the government, if serious about Digitalization, must pay attention more towards improvement of Cable TV infrastructure because of which Digitalization will actually succeed. Cable Operators are the best to service the masses with entertainment and broadband and are much more experienced than the DTH or Telecom Operators in providing these services. Advantage of improving last mile cable TV infrastructure is twofold:-

a) It will expedite digitalization.

b) It will drastically improve the broadband penetration in the country, helping economy in a big way. 

c) Once the last mile is improved, government revenues will always increase as types of services carried on these networks will increase.

The problem is that I&B Ministry’s plan of action is not focused in this direction. From the notified regulations as well as the Cable TV Act as amended for DAS, it is evident that Ministry is being guided by some vertically integrated groups of broadcasters who are using the government to strengthen their hold on their nationwide networks. It is sad that the goals which Ministry is chasing will help only these few companies and not millions of Cable TV subscribers for whom the government pretends to be working. 

No one has so far understood the need of the people to embrace digital services. This is the real reason that consumers are not much inclined on shifting to digital cable. Government is forcing the MSOs who are in turn forcing the LCOs to seed STBs aimlessly. Since there is no public demand, cable operators are unable to force the consumers to buy the STBs.

Economic state of the country is such that not more than 40% of the existing cable TV subscribers can afford digital cable. People are already fedup with rising prices, shortage of power, drinking water shortage and an unhealthy environment. Government is struggling to provide food to millions. We are already seeing this phenomenon in the Metros where Ministry has started threatening to cancel the licenses of MSOs and Cable Operators if they do not achieve the target deadlines. It shows a sense of desperation in the Ministry officials to make their design of mandatory digitalization successful by using any means. Can the Ministry take away the fundamental rights of thousands of cable operators who are earning their livelihood with this business for more than 20 years.

If the Ministry’s sole aim is to earn more revenue from Cable TV subscribers by bringing in transparency in the system, it will have to introduce more practical solutions than the present one.

According to the Ministry, 1.75 lakh set-top boxes need to be added a day to meet deadline of 1st November. Government has no plans to extend this deadline for first phase of digitalisation of cable television. 

At a roundtable organised by Confederation of Indian Industry (CII) on 30 August, information and broadcasting secretary Uday Kumar Varma said that the government is committed to digitising cable television and that being mandated by Parliament, no further extensions were possible.

He forgot that I&B Minister had also assured the Parliament many more things and given her commitment to get the support for the Bill. She had assured that the existing small operators would not lose their livelihood as HITS would provide them an affordable digital connection; consumers would get the benefit of world class service at the same cost etc. The regulations drafted after the Bill was passed, did everything contrary to what was told in Parliament. 

We all know that there is no HITS at present and the tariff fixed by TRAI provides only 100 FTA channels which a subscriber can get for Rs 50 today. For every pay channel a subscriber needs to pay and even if he selects one pay channel, he lands up paying Rs 150 every month because that is the minimum that TRAI has fixed. If a subscriber wants to subscribe to all pay channels he is enjoying today, he may pay as much as Rs 500 every month, just like in DTH. Does the common man in India want a world class service and quality at this price?  

Failure of the new system has already set in. Hardly 35% set-top-boxes have been installed. Industry does not have the resources to install 1.75 lakh boxes every day. “Cities including Chennai and Delhi are lagging behind in set-top-box installation,” said Roop Sharma, president of cable operators’ federation of India (COFI), a body representing last mile cable operators and independent MSOs. Given these challenges, Sharma believes the deadline would be “impossible” to meet.

She listed issues that still needed to be resolved, primary among them being the revenue sharing model. Planning for set-top box installation, creation of awareness among consumers and inter-operability of set top boxes were other unresolved issues, Sharma pointed out.

TRAI chairman Rahul Khullar, who was also among the CII conclave said digitisation of cable television was necessary because advances in technology demanded it.

That is understood but why mandate for every existing consumer? Everyman cannot afford the advanced technologies. Has TRAI forced 2G to be taken off from the market forcing people to adopt 3G and 4G so that spectrum can be better utilized with better services to the consumers and more revenue to the Government? Another issue that will be a big in hurdle digitalization is the revenue share. Since pay channels are optional in the Digital regime, a subscriber may not subscribe to them. Hence pay channel revenue that has to be shared between MSO and LCO in the ratio of guaranteed. 45% of BST that has been given to TRAI is pea nuts because maximum rate of BST is Rs 100 out of which an LCO will at the most get Rs 45. This amount is just not adequate to provide the world class services TRAI expects out of them. 

In 2002, a committee in Finance Ministry had calculated the cost per subscriber for operating a small cable network as Rs 72. This amount was also low compared to Rs 180 that cable operators demanded. This was because the calculations were done for a much bigger size of the small network that actually existed on ground. Since with freezing of the Tariff since 2003, conditions have not changed much and after adding inflation, operators expected at least Rs 150 this time. This time TRAI has even avoided giving out basis of their calculations. They have depended on the inputs only fr0m broadcasters who inflate their viewership to garner more ad revenue and to extract more fr0m the MSO/ Operators. 

Result of the above is that Broadcasters are demanding strict adherence to the deadline of 31 October 2012 in the Metros and operators are approaching the courts for a fairdeal. 

There are six cases filed in TDSAT against TRAI’s Tariff order and revenue share. Two petitions were filed on 2nd July 2012, one by DigiCable and the other by a group of independent MSOs of Delhi including Delhi Distribution Company (DDC), Home Cable and other MSO (I) against TRAI’s tariff order. IndusInd Media and Communications and United Cable Operator’s Welfare Association, New Delhi, have also approached the Tribunal seeking better revenue share and extension in date for digitization. It appears just like in CAS implementation, here too the Courts will decide the fate of the industry.

Source: http://cablequest.org/articles/col-kk-sharma/item/1842-digitalization-requires-a-new-direction.html
Source: http://cablequest.org/articles/col-kk-sharma/item/1842-digitalization-requires-a-new-direction.html